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Power plant awaits coal contract

By Chuck Slothower cslothower@daily-times.com

Updated:
12/06/2012 11:01:17 PM MST

FARMINGTON — Plans to partially decommission Four Corners Power Plant are on hold while the plant's operator and mining company BHP Billiton negotiate a contract to supply two remaining units with coal.

The plans have not changed from earlier announcements, but plant operator Arizona Public Service Co. wants the coal agreement in place before forging ahead with closing part of the plant.

"We need to have that certainty because there will be some investments made in Four Corners on our part," said Damon Gross, a spokesman for the Phoenix-based utility.

If the hurdles are cleared, APS will install additional pollution controls to reduce emissions from the two remaining units. That will cost the plant's multiple owners approximately $500 million. Of that, APS expects to pay $315 million.

"As you can imagine, before making that investment we would want to have that certainty moving forward," Gross said.

The current coal contract expires in 2016.

If APS and BHP Billiton can agree on an extension of that contract, APS will complete its purchase of Southern California Edison's stake in the plant's two newest units. The Arizona Corporation Commission and California Public Utility Commission already have approved the $294 million transaction.

APS has not released details about the timing for decommissioning the three older units because it hinges on the coal contract. Negotiations for the extension are ongoing, Gross said.

The negotiations come against a backdrop of reduced demand for coal in the United States.

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Utilities across the nation have switched some electric production to natural gas.

Plans for San Juan Generating Station, the area's other coal plant, call for closing some units and replacing them with natural gas power in years to come.

Four Corners is fed by coal from Navajo Mine, operated by BHP Billiton. The mine and power plant are reliant on each other: the mine is the power plant's sole supplier of coal, and the plant is the mine's only customer.

BHP Billiton plans to cut 100 to 200 jobs at Navajo Mine. The partially decommissioned plant would need about 30 percent less coal.

"We're continuing to work with APS and are making progress towards reaching a final agreement, and we're committed to working with them to get the deal done," said Pat Risner, president of BHP Billiton's New Mexico Coal unit.

Risner said the specifics of extending the coal contract are under negotiation, but BHP Billiton is looking for a long-term deal.

"Obviously we're looking to secure a long-term future for our employees and stakeholders for Navajo Mine," he said.

The partially decommissioned plant also will need fewer employees, although it's not clear exactly how many. APS has vowed not to lay off any employees. Workforce reductions will be achieved through normal attrition, Gross said.

The plant's labor force will be put to work on decommissioning the three units.

"Once we begin decommissioning, we're still going to need a lot of employees there for that work," Gross said.

Nevertheless, political leaders worry over what the plant's partial shutdown will mean for Farmington's fragile economy.

"We would continue to be concerned about the loss of jobs, both at the power plant and at the coal supply companies," said Farmington Mayor Tommy Roberts. "The combined loss of jobs in those two areas would create a significant negative impact on the local economy."